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China automobile

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China automobile

  1. 1. Historic DevelopmentHistoricDevelopment 1953-65 • Initial StageCurrent State 1966-80 • Growth StageVW competitiveposition • Open Market Stage 1981-90VW versus GM 1991 • Comprehensive DevelopmentFutureDevelopment NOW • Current State of EconomyConclusion
  2. 2. 1. Initial Stage 50s – mid 60sHistoric • Factories job was to copy and assembleDevelopment automobiles.Current State • By 1965, 21 plantsVW competitiveposition 2. Growth StageVW versus GM mid 60s – early 80sFuture • Government’s policy was to constructDevelopment Regional Industries.Conclusion • By 1980, 53 plants out of 2379 enterprises 12.5% sedans
  3. 3. 3. Open Market Stage mid 80s – early 90sHistoric • Radical restructuring.Development • Increased investment to meet demand. • Introduction of foreign technology, foreign technologyCurrent State and management support.VW competitive 4. Comprehensive Developmentposition since 90sVW versus GM • Automobile industry became core part of Chinese economy.Future • 15% Average annual growth.Development • Enterprises are forced to improve products and service quality.Conclusion • Switch from trucks to sedans.
  4. 4. Market RestrictionsHistoric • Foreign companies were only allowed to make jointDevelopment ventures of no more than 50% with local companies and localize 40% of the parts and components to encourageCurrent State the local industry. • High protectionism measuresVW competitive • Government was keeping brakes on the marketposition • Regardless of their ranks, Government Employees wereVW versus GM banned from purchasing cars • Imports quotas and tariffsFuture • Non-attractive market due to Consumer behaviors:Development 1. Preferring cash purchases 2. Preferences made on emotional factors andConclusion intangible attributes rather than efficiency or speed
  5. 5. Current state of the EconomyHistoricDevelopment Market StructureCurrent State Global ChinaVW competitive 6+3 3+Xposition Large Motor FAWVW versus GM GroupsFuture Independent DFMC ManufacturersDevelopmentConclusion SAIC
  6. 6. Current state of the EconomyHistoricDevelopment 6 + 3 Status Guiding Principles:Current State • Form larger competitive groupsVW competitiveposition • Strategic reorganizationVW versus GM • Intensive R & D • Start International cooperationFutureDevelopmentConclusion
  7. 7. Current state of the EconomyHistoric 3 + X statusDevelopment • First Automobile Workshop FAW 10 b$ revenueCurrent State 22 joint ventures – includes: Audi & MazdaVW competitive • Dongfeng Motor Corporationposition 6 b$ revenue joint ventures: Nissan, Citroen & KiaVW versus GM • Shanghai Automobile Industry Corporation SAIC the biggest group in china, >10 b$ revenueFutureDevelopment strong ties with government officials 52 joint Ventures: VW & GMConclusion
  8. 8. Current state of the Economy “2004”HistoricDevelopment • Enterprises: majority are state ownedCurrent State account for 30% of productionVW competitive • Sales:position 4.44 million unitsVW versus GM • Imports and Exports, 2003: import: 171,903 units of 5.29 b $Future export: 47,439 units of 370 m $Development in 2006, reached 340,000 unitsConclusion
  9. 9. Current state of the Economy 2004 Sales ratiosHistoric TrrucksDevelopment 28% Sedans 45%Current State Passenger Cars 27%VW competitivepositionVW versus GM Enterprises Number 4000Future 3000 2904 2596 2326Development 2000 1228 Enterprises 1000 522 Number 104Conclusion 0 1956 1960 1965 1970 1975 1980 1985 1990 1995 2000
  10. 10. Current state of the EconomyHistoricDevelopment Joining WTO, 2001 • Decrease tariffs 10% annually for sedansCurrent State and 4-8% for trucks and passenger cars.VW competitive • Complete cancellation of quotas in 5 years.position • Cancellation of restrictions of importing critical parts.VW versus GM • Allowance of 100% FDIFuture • Adoption of international after-sale servicesDevelopment • Removal of protectionismConclusion
  11. 11. What worked for VW up till 2004?HistoricDevelopment VW Strategy Strong alliance with SAIC High growth & demand in China • Middle class • SAIC is a SOE • First Mover income jumped • Strong policy advantage from USD $ support • SimpleCurrent State 460- $1091 technology, • Localisation • Option of car with local simple product financing by suppliers with • High GermanVW state owned SAIC support Qualitycompetitive banks • Domestic • Low • 30% annual content soared investment forposition growth rate to 70% in early distribution 90s network • High op.VW versus GM margin: 30% vs. R.O.W 5%FutureDevelopmentConclusion
  12. 12. VW Competitive Position by 2004 • Summer 2004 VW faced critical issues:HistoricDevelopment Weak Sales and product High Cost structure teamsCurrent StateVW Change in Customercompetitive Changing Market; Profile: Simpleposition market share plunge to technology, simple 16% products strategy no longer works!VW versus GMFuture Losing First MoverDevelopment Advantage!Conclusion
  13. 13. VW Change Management ProgrammeHistoric • “Start from Zero” changeDevelopment management programmeCurrent StateVWcompetitive • Marcus Schütz, Director was taskedposition to design and implement changeVW versus GM initiatives over next 3 years. • Develop new set of success factorsFutureDevelopment that is sustainable!Conclusion
  14. 14. VW DilemmaHistoricDevelopment Sales infrastructure FAW vs. SAIC Modification ofCurrent State Product Strategy • Reselling and distributing • Bitter competitorsVW done by SAIC a failure • Separate distribution • German standards= • Lack of control of S&M networks and supply overdesigningcompetitive • SVW Sales Corporation: bases • Little flexibility for 24 RSSCs and 700 dealers • Impossible to create consumer preferencesposition too late synergies btw SAIC and • CKD transfer to local • B2B to B2C structure FAW bases • High cost management • Weak negotiation pointVW versus GMFutureDevelopmentConclusion
  15. 15. GM’s issuesHistoricDevelopmentCurrent StateVW competitiveposition Slow turnaround timeVW versus GM Poor business strategyFutureDevelopment Burdened with high cost eg pensions benefitsConclusion Financial crisis and prospect of bankruptcy
  16. 16. VW vs. GM in ChinaHistoric • First mover advantageDevelopment • S&M retrieved from SAIC too lateCurrent State VW • Fear of losing technology advantage • German Quality standard=overdesignVW competitiveposition • S&M in their control from day oneVW versus GM • Channel of technology transferFutureDevelopment GM • Left localization to local automakers • Build a component industryConclusion

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